Hubert to the Rescue !!

Alcatel-Lucent posts another loss, plans 4,000 more job cuts
11:25a ET October 31, 2007 (MarketWatch)

LONDON (MarketWatch) -- Alcatel-Lucent SA, the world's largest
telecommunications-equipment company, on Wednesday said it will cut a
further 4,000 jobs and replace its chief financial officer as part of
a turnaround plan unveiled as it posted its third straight quarterly
loss.

The additional job cuts bring total workforce reductions to 16,500 and
will help save an extra 400 million euros ($577 million) by the end of
2009. Jean-Pascal Beaufret, the group's CFO, is stepping down to
"pursue other opportunities" and will be replaced by the current head
of the enterprise division, Hubert de
Pesquidoux.*************************************** ****viva le Hubert

The moves announced Wednesday are part of a much anticipated
turnaround plan requested by the board and signal Alcatel-Lucent's
determination to accelerate its restructuring. But the initiatives
received mixed reviews from analysts who had called for much larger
job cuts and for the sale of parts of the company's portfolio.

News of the reorganization came as the gear maker posted an adjusted
net loss of 258 million euros, or 0.11 euros a share, in the third
quarter. It earned 532 million euros, or 0.23 euros a share, a year
earlier. An exact comparison with last year's third-quarter results
can't be made as the two companies had not yet merged.

Revenue fell 11% year-over-year to 4.35 billion euros. However, it
rose 2% sequentially. The average forecast of eight analysts polled by
Dow Jones Newswires was for a net loss of 223 million euros and sales
of 4.4 billion euros. Gross margin improved to 34.2% from 33.4% in the
second quarter.

Turning to the fourth quarter, the group said it expects a "solid ramp
up" in revenue from the third quarter. It also said revenue would be
flat this year, updating an earlier prediction that sales would be
unchanged to slightly up.

The company confirmed it's on track to achieve pre-tax cost savings of
600 million euros this year.

Alcatel-Lucent shares, in New York trading, rose 22 cents to $9.61.
See Europe Markets.

*****down to $7 12/26

Some slowdown in North American spending

Alcatel-Lucent shares have lost roughly 40% so far this year. The
company, created from the merger of France's Alcatel and Lucent
Technologies of the U.S., has struggled to bring about the promised
scale benefits and to become a more formidable competitor to Sweden's
Ericsson and aggressive Chinese vendors such as ZTE Corp.

Alcatel-Lucent has issued three profit warnings since its merger in
December 2006.

But its competitors haven't been immune to operational hiccups either.

A profit warning from rival Ericsson earlier this month sent its
shares down roughly 25% in a single day and cast doubt on the level of
demand for mobile-network upgrades, particularly from North America.
See archived story.

Alcatel-Lucent Chief Executive Patricia Russo on Wednesday said market
conditions remain difficult, "with continued pressure on revenues and
margins due to intensified competition and some slowdown in spending
in North America."

Analysts fret over CFO's departure

The news of Beaufret's departure wasn't cheered by analysts.

Richard Windsor of Nomura, who has a neutral rating on Alcatel-Lucent,
said the executive is widely regarded as the best CFO in the industry.

His departure, he said, "is a blow upon a bruise" and he warned that
the executive's "steady hand and pragmatic approach will be sorely
missed at a time when Alcatel-Lucent needs him the most."

ABN Amro analysts also expressed concern at Beaufret's departure,
calling the news "a bit worrying" and saying it hurts the credibility
of the new financial targets.

Beaufret is the third senior executive to leave the company since the
end of the summer.

Regarding the additional 400 million euros of cost savings unveiled
Wednesday, Bear Stearns analysts noted that the challenge will be to
realize them rather than reinvest them, given current market
conditions and the company's growing footprint. The company has been
forced to reinvest most of its cost savings to date to remain
competitive.

As part of its organizational revamp, Alcatel-Lucent said it has set
up a seven-member management committee that will report directly to
Russo and replace a group of 21 executives.

The committee will be charged with assuring execution and business
performance, creating a "more focused and efficient operating model."

Russo said she selected "every member" of the team, which includes
regional and divisional heads.

Turning to individual divisions, revenue rose 5% to 1.52 billion euros
at the fixed-line carrier business. It dropped 24% to 1.28 billion
euros at the wireless division. The company attributed the decline in
wireless sales to strong comparisons in the year-ago quarter.

Russo said in a conference call that the company has no intention of
exiting any significant parts of its portfolio of products and will
remain both in wireless and wireline.

At the convergence unit, revenue fell 41% to 346 million euros. While
it has gained market share in next-generation products, that business
is still not big enough to offset the declines in demand for
traditional equipment, the company said.

Sales at the enterprise unit rose 5% to 380 million euros.

Russo said Alcatel-Lucent has no intention of selling the division.